Kabbage Review – There is a $2 trillion (!!) funding gap for small to medium-sized enterprises. This means that businesses with fewer than 250 employees find it incredibly tough to get financing. Money is needed to buy new inventory, hire new staff and take advantage of a good deal when it presents itself.
Banks and traditional credit institutes are not making money available however, curtailing growth in the US and abroad.
In short: less money = less growth.
Kabbage Review | Overview
Luckily, many alternative finance platforms have emerged to fill the void left by the banks. Kabbage is perhaps the most prominent of these, having provided $2 billion in funding to 75,000 small businesses.
With a successful 7 year track-record, it is clear that Kabbage has done a good job of providing small businesses with funding. But, many innovative platforms are emerging and taking their slice of the SME pie.
Even so, Kabbage offers access to almost instant cash which is a clear advantage over most other platforms in the space. Additionally, small business owners can receive up to $100,000, significantly higher than PayPal Working Capital for example. You can also take a look at our Paypal Working Capital review.
To repay the loan, Kabbage get’s full access to the borrowers PayPal account. On the due date, Kabbage processes the repayments automatically. This is convenient for many but a little scary for some, as the platform can effectively take control of your business.
Kabbage will only consider your application if you are making at least $50,000 in yearly revenues. A large amount for new & part-time Online sellers.
Further, Kabbage loans are only available for 2 different terms: 6 and 12 months. This gives borrowers very little flexibility, and makes the repayment of larger loans difficult. Add an expected APR of 32-100% and you can see why Kabbage is not the ideal solution for everybody.
Finally, Kabbage is only available to small business owners from the USA. Entrepreneurs from other countries have to look for alternatives.
How does Kabbage hold up in this new world of alternative finance? Let’s start the Kabbage review!
|Kabbage||Bitbond||OnDeck||PayPal Working Capital|
|Maximum loan amount||$2,000 - $100,000||$70 - $10,000||$5,000 - $250,000||$1,000 - $97,000|
|Loan terms||1-12 months||6 weeks to 5 years||3 to 36 months||Typically between 1-18 months|
|Minimum Credit Score||550||No minimum||500||No minimum|
|Approval Time||24 hours||24 hours||24 hours||24 hours|
|Availability||United States||Globally||United States||U.S. & UK & Australia|
This is why you should get a loan with Kabbage:
- Get a large loan of up to $100,000
- They might look past a rocky credit history
- Kabbage provides financing almost instantly
- You can connect Online accounts to prove your creditworthiness
This is why you should NOT get a loan with Kabbage:
- Prohibitively high APRs from 32% to 100%
- Complicated fee structure
- Impractical repayment dates
- Small loan terms require fast repayment
Get a large loan of up to $100,000
Strictly speaking, Kabbage provides a line of credit rather than a loan. In effect, this means that business owners gain flexibility, being able to take out what they need and leave the rest alone.
With $100,000 borrowers can be sure of sufficient capital to grow their business. Most other platforms provide significantly less funding.
They might look past your rocky credit history
For borrowers with a poor credit history, Kabbage is a good option. The platform checks your credit history, but puts more emphasis on the quality your Online accounts (more on that later) and business track record.
Here, your average monthly revenue, number of listed items and number of years in business play a crucial role. From this data, Kabbage assesses your creditworthiness to determine a credit limit and set your fees.
Kabbage provides financing almost instantly
The Georgia-based platform is incredibly fast. The application process takes minutes, and the assessment happens instantly (in most cases). As a result, Kabbage is excellent for business owners who need funds pronto.
The idea of instant cash might be alluring to some, but be careful what you wish for. Mistakes happen, and it is always advisable to think long and hard about taking out a small business loan.
You can connect Online accounts to prove your creditworthiness
Connecting your Online accounts forms the centrepiece of your borrower application on Kabbage. It is the quality of these accounts which will ultimately determine the fees and credit limit you receive.
Thus, Kabbage gets access to your PayPal, eBay, and Amazon accounts (as well as many more), and digs through your feedback, listings and revenue. With these data-points, Kabbage can accurately assess the quality of your business and assigns corresponding fees and limits.
For entrepreneurs used to dealing with banks, this is an important innovation as it cuts out laborious paperwork.
Prohibitively high APRs from 32% to 100%
Kabbage is among the most expensive funding platforms for small businesses in the U.S. At APRs ranging from 32% to 100% borrowers need to think long and hard about the extra financial strain on them and their business.
Because of this, Kabbage is ill-suited for purchasing equipment or hiring staff. These investments should be done with a long-term, more affordable loan.
Complicated fee structure
No Kabbage review would be complete without a look at the complicated fee structure. Each month, the borrower pays back a percentage of the borrowed amount, ie. the principal plus a fee.
For the first two months, this fee can range between 1% and 12% of the total loan amount. Exactly where you fall in that range depends on Kabbage’s assessment of your Online accounts. Great accounts will ensure lower fees. The reverse is true for not-so-great ones. An additional late repayment fee kicks in after 5 days overdue.
If you choose a 6 month loan term, your fee for the remaining four months is 1% of your loan. Kabbage has helpfully provided a repayment calculator, but let’s go through a repayment example here.
A loan of $55,000 over 6 months, would result in around $6,600 in fees and a monthly repayment of around $10,000. This number is higher for the first two months, because this is when Kabbage leverages its higher fees.
Impractical repayment dates
For Online sellers the repayment dates are almost as important as the loan amount. People who pay their eBay and Amazon fees at the end of the month, might be worried about Kabbage repayments on the 5th or 7th of the month. This gives them less than a week to make the revenue necessary to service the loan.
Late repayment fees are imposed five days after your due date, which can further add to the strain of repayment.
Small loan terms require fast repayment
Kabbage has funded over $2 billion small business loans to date, so it’s clearly working for some. But choosing between 6 and 12 months to repay a $100,000 line of credit at ~50% APR can be a daunting proposition.
Thus, business owners might be well-advised to look for loans with longer loan terms. These provide more flexibility and are better-suited for long-term investments like new merchandise and new staff.
What are your alternatives?
Kabbage is a doubtlessly a great service for many people, but is sub-optimal for many more. What small business owners need, is a long-term low interest loan to grow their business, regardless of location.
Luckily, other players have emerged to provide exactly that. One of these is Bitbond, the market leader in global peer-to-peer loans for Online sellers.
On Bitbond interest rates range between 1% and 4% per month, significantly less than most competitors. Additionally, Bitbond’s fee structure is transparent and simple. There is one fee of 1-3% which get’s deducted from the loan amount when the loan is successfully funded.
That’s it. From then on, you can focus on growing your Online business. This is made easier by the large variety of loan terms on the platform. Borrowers can choose loan terms from 6 weeks to 5 years. Unlike Kabbage, Bitbond is a peer-to-peer platform, meaning that investors from around the world crowdfund your small business loan. Your repayments then go right back to these investors and not to Bitbond.
Finally, Bitbond is the only platform specialised in small business loans which is available globally. This is achieved by using bitcoin as a payment network to bypass the transfer and exchange fees concomitant with traditional fiat currencies. (Read more here)
On the other hand, the platform only services loans up to $10,000. This is significantly less than Kabbage, but may be the optimal amount for many Online sellers and small business owners.
Kabbage Review | Conslusion
Kabbage is a great choice for medium-sized businesses happy to take on a larger loan over a shorter time period. Repayments are quick and efficient, and the platform has over 7 years experience to draw from. As a result, most borrower’s make good experiences with Kabbage, enjoying the efficiency and availability of almost instant cash.
For smaller Online sellers and small business owners, Bitbond might be the better choice however. Lower average APR, longer loan terms and far fewer fees, can make the difference between a good and a bad financial year.
Check both out, and thanks for reading our Kabbage review!